Date: 20010921
Docket: 2001-1539-IT-I
BETWEEN:
JAMES HUNTER,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasonsfor
Judgment
Bowman, A.C.J.
[1]
These appeals are from assessments made under the Income Tax
Act for the taxation years 1995, 1996 and 1997. The issue is
the deductibility of payments made by the appellant to his former
common-law spouse for the support of their two children.
[2]
The facts are not in dispute. The appellant lived in a common-law
relationship with Charlotte Olson. They never formally married.
They had two children, Curtis, born April 27, 1989, and
Jeremy, born September 4, 1992. They separated in February
1992.
[3]
On December 20, 1994 the appellant and Charlotte Olson
entered into a written agreement whereby the appellant bound
himself to pay Charlotte Olson $375 per month for the support of
the two children. The agreement, which was signed by both
parties, reads
I James Hunter of Saskatoon Saskatchewan do hereby agree to pay
child support payments to Charlotte Olson for the provision of
Jeremy and Curtis. The payment of three hundred and seventy five
dollars 375.00 will be made before the end of each month and
these payments shall continue to be made until mutually agreed
otherwise or increased as per mutually agreed.
[4]
The appellant made the payments in accordance with the agreement
during the years in question and deducted them in computing
income. Evidence was also adduced, over the objection of counsel
for the respondent, that Charlotte Olson included the amounts in
income. I agree that this evidence is irrelevant but in the
informal procedure it is inappropriate that technical evidentiary
roadblocks be put in front of litigants. The judges of this court
are perfectly capable of ignoring irrelevant evidence. It is
important that an appellant in an appeal under the informal rules
be permitted to put in the case as he or she sees fit without
being faced with an array of technical objections about
relevancy.
[5]
The issue is whether the appellant can rely upon
subsection 252(4) of the Income Tax Act, which
reads
In this Act,
(a)
words referring to a spouse at any time of a taxpayer include the
person of the opposite sex who cohabits at that time with the
taxpayer in a conjugal relationship and
(i)
had so cohabited with the taxpayer throughout a 12-month period
ending before that time, or
(ii)
would be a parent of a child of whom the taxpayer would be a
parent, if this Act were read without reference to paragraph
(1)(e) and subparagraph 2(a)(iii)
and, for the purposes of this paragraph, were at any time the
taxpayer and the person cohabit in a conjugal relationship, they
shall, at any particular time after that time, be deemed to be
cohabiting in a conjugal relationship unless they were not
cohabiting at the particular time for a period of at least 90
days that includes the particular time because of a breakdown of
their conjugal relationship;
(b)
references to marriage shall be read as if a conjugal
relationship between 2 individuals who are, because of paragraph
(a), spouses of each other were a marriage;
(c)
provisions that apply to a person who is married apply to a
person who is, because of paragraph (a), a spouse of a
taxpayer; and
(d)
provisions that apply to a person who is unmarried do not apply
to a person who is, because of paragraph (a), a spouse of
a taxpayer.
[6]
The deduction claimed is under paragraph 60(b).
[7]
All of the conditions of that provision are met except, according
to the respondent, that Charlotte Olson was not a
"spouse" or "former spouse" of the
appellant.
[8]
Subsection 252(4) was enacted by S.C. 1994 c. 7
Schedule VIII (1993 c. 24) subsection 140(3).
Subsection 140(4) provides that
Subsections (1) and (3) apply after 1992.
[9]
Unless "spouse" means someone in a common-law
relationship independently of the statutory definition in
subsection 252(4) — a point that I need not decide
— the question here is whether the extended meaning of
spouse in subsection 252(4) can assist the appellant in his
claim to deduct the payments to Charlotte Olson. The appellant
contends that since the payments were made after 1992
subsection 252(4) has the effect of allowing the deduction.
The Crown's position is that since the common-law
relationship terminated in 1992 the appellant and Charlotte Olson
were not married and were not spouses in 1992 and therefore
cannot, in 1995, be "former spouses".
[10] The Crown
contends that if I accept the appellant's argument I am
ignoring the words in subsection 140(4) of S.C. 1994 c. 7
"apply after 1992" and in effect giving
subsection 252(4) a retroactive operation. The appellant
contends that acceptance of the Crown's position ignores the
words "at any time" in subsection 252(4) or at least
seeks to amend that phrase to read "at any time after
1992".
[11] The point
is a narrow one and this court is divided on the question.
[12] In
Carey v. Canada, [1999] T.C.J. No. 191, payments
were made in 1994 and 1995 pursuant to a separation agreement
entered into when the parties separated in 1988. Bowie J.
applied subsection 252(4) to permit the deduction.
[13] In
Bromley v. Canada, [2000] T.C.J. No. 876,
Bell J. declined to follow the decision of Bowie J. in
Carey and said, in paragraph 7:
Subsection 252(4) applies only to taxation years after 1992.
The amendment introducing that subsection cannot, therefore, be
said to characterize a relationship as a common law relationship
in which each of the Appellant and Custeau could be regarded as a
spouse or former spouse, that relationship having existed prior
to, and having ended in, 1988.
[14] A
substantial portion of the judgment of Bell J. involved a
discussion of which of three versions of
paragraph 60(b) applied. I do not need to consider
this point. Counsel for the respondent argued, rightly in my
view, that if Charlotte Olson was a "former spouse" of
the appellant and if their relationship was a
"marriage" he was entitled to succeed under one or
other version of paragraph 60(b).
[15] In
Scott v. Canada, [2001] T.C.J. No. 437, the
issue was the deductibility of payments made in 1997 under an
agreement made in 1992 when the common-law relationship came to
an end. Hershfield J., noting the difference between Bell
and Bowie JJ., said at paragraph 7 (footnotes omitted):
This subsection was added in 1994 applicable after 1992. That is,
under the transitional rule, this expanded meaning of
"spouse" is to be read as being part of the Act
effective January 1, 1993. Since the Act is being read in
this case in respect to the 1997 year (the payment year), the
expanded definition of "spouse" unquestionably applies.
Since the expanded definition of "spouse" has
application, it must be applied in accordance with its terms,
which terms require the examination of the subject relationship
(to determine if it is a conjugal relationship) at a time (that
is "any time" which includes a time before January 1)
that the relationship needs to be determined, i.e. the time when
the reference to spouse is being examined under the Act. Since
the context here is determining a "former" relationship
(a former spouse), the time for determining the relationship will
almost invariably be before the year in question. For example, a
conjugal cohabitation commencing in 1995 ending in 1996 will be
recognized in 1997 as giving rise to former spouses. That is, in
the context of determining whether a person is a former spouse,
the expanded definition has to look back. The expanded definition
does not put a limit on how far to look back. To the contrary, it
stipulates, in effect, "any time" as the available look
back time. The expanded definition does not put a limit o how far
to look back. To the contrary, it stipulates, in effect,
"any time" as the available look back time. The
expanded definition applies at "any time" the
relationship needs to be examined including relationships that
started, or started and ended, prior to 1993. If the expanded
definition were to apply otherwise the express language of the
definition would have provided dates before and after which the
relationship can be examined or not. If one wants a legislative
model exemplifying such temporal applications one only has to
look at another definition in subsection 56.1(4), namely, the
definition of "commencement day". The introduction of
that definition is effective after 1996 but the Act does not then
read as if the definition does not depend on other relevant
times. One must determine at any time after 1996 whether there is
a commencement date but whether or not a commencement date in
fact exists depends on events happening before April 1997 or
after May 1997 as expressly set out in the definition of
"commencement day". If Parliament had intended that
common law relationships before 1993 could not be recognized, the
cohabitation period referred to in subsection 252(4) could
similarly have referenced relevant dates as to when cohabitation
had to commence or end. The effective date alone being 1993, does
not do that in my view, at least in this case where the express
language of the amended provision invites a construction that
permits (dictates) examining a relationship "at any
time" which, as stated, clearly includes a time before the
effective date of the amendment. I see no other interpretative
approach in this case.
[16]
Hershfield J. allowed the appeal and permitted the
deduction.
[17] In
Girard v. Canada, [2001] T.C.J. No. 499,
Miller J., again noting the difference between Bell and
Bowie JJ., allowed the deduction in 1998 under a separation
agreement made in 1995 arising out of a common-law relationship
that ended in 1991. At paragraphs 9, 10, 11 and 12 he
said:
9
Pursuant to this section I have no hesitation in finding the
Appellant and Ms. Johnstone were spouses and qualify as such for
purposes of determining "support amounts" There is
nothing in section 252(4) of the Act that indicates the
section is not to apply to relationships before a certain period
of time. This was the law in 1998, the year in which the
deduction is sought. The Respondent contends I must look at the
law at the time the couple separated. I do not accept that
argument. She cited the decision of this Court in Bromley v.
Regina 2000 CarswellNat 3033, [2001] 1 C.T.C. 2468. In that case
Judge Bell found section 252(4) "applies only to taxation
years after 1992". I find that the taxation year in question
in this case is the Appellant's 1998 taxation year. In 1998
section 252(4) was part of our legislation and it defined
"spouse" for all purposes of the Act to include someone
who fits Ms. Johnstone's description. Section 140(4) of the
Act Amendment Revisions introducing this amendment did not state
that the conjugal relationship referred to in section 252(4) must
have existed after 1992; it simply stated that the subsection
applies after 1992. I contract this to subsection 20(11) of the
Amendment Revisions, which differs significantly: it states most
exactly that the section refers to a breakdown of marriage after
1992. If the legislators had used such exact language in
introducing section 252(4), my conclusion would differ.
10
The interpretation put on the timing of the applicability of
section 252(4) is either:
1.
For taxation years after 1992 I am to interpret
"spouse" in accordance with section 252(4); or
2.
I am to interpret "spouse" in accordance with section
252(4) for only those conjugal relationships existing after
1992.
11
I favour the former approach. For the taxation year 1998 I rely
on section 252(4) and find the Appellant's relationship with
Ms. Johnstone falls within that definition notwithstanding that
relationship concluded prior to 1993.
12.
In Bromley v. R. Judge Bell recognized that Judge Bowie also came
to a different conclusion in Carey v. R., 1999 CarswellNat 562,
[1999] 2 C.T.C. 2677, D.T.C. 3502 allowing the deductibility of
amounts paid in 1994 and 1995 by a common law husband in
connection with a relationship which had ended in 1988. It is
cause for some uncertainty in the tax community and public
generally when the introduction of amending legislation is open
to differing interpretations by a Court. Judge Bell put it as
follows in paragraph 10 of his Judgment:
10
... Lack of precision in the legislation in this regard is
extremely unfortunate because faulty legislation, not clearly
presenting the intent of Parliament, causes taxpayers concern,
time and expense in pursuing objection and appeal procedures.
I agree with those comments.
[18] I
entirely agree with Bell and Miller JJ. that it is
unfortunate that legislation should lead to such uncertainty and
differences of opinion in members of this court. Indeed it is
deplorable.
[19] The
provisions of the Income Tax Act relating to the fiscal
consequences of marital breakdown and spousal and child support
affect a large number of taxpayers, many of whom are in
straitened financial circumstances and cannot afford expensive
professional advisors to assist them in determining the tax
consequences of their post-marriage financial arrangements. Yet
the provisions of the Act in this area are among the most
complex in Canadian legislation. Indeed, even the professionals
probably find the provisions of the Act in this area at
best ambiguous and at worst incomprehensible. It is surely not
too much to expect that our legislative draftspersons express
themselves simply, clearly and unambiguously.
[20] I have
set out the conflicting interpretations arrived at after careful
analysis by experienced and respected judges of this court. No
one could be criticized for adopting one as opposed to the other.
I think, however, that the preferable interpretation is that
subsection 252(4) has the effect, in its application to a
payment made in 1995, pursuant to an agreement made in 1994
arising out of a common-law relationship that commenced and ended
before 1993, of deeming that relationship to be a marriage and
the parties to the relationship to have been spouses and
therefore, in 1995, to be former spouses for the purposes of
paragraph 60(b).
[21] To say
that a new provision "applies after 1992" is not to say
that the effect of its application cannot extend to before 1993.
Here we have a provision, subsection 252(4), that in effect
deems a particular relationship to be a marriage. It
prospectively attributes to an event that existed prior to its
effective date (the common-law relationship that existed up to
February 1992) a legal effect on events that occurred after its
effective date (the support payments in 1995, 1996 and 1997 made
under the 1994 agreement). This description is in accordance with
the analysis made by Mr. Elmer A. Driedger, Q.C., the
renowned authority on statutory interpretation. Mr. Driedger
wrote extensively on the subject of retrospective legislation.[1]
[22] The
presumption against the retroactive operation of statutes is one
that is intended to protect a subject from the retroactive
removal of accruing or accrued rights.[2]
[23] Before
proceeding any further with this analysis we should be clear on
two points. The agreement between the appellant and Charlotte
Olson was entered into in 1994 and the payments were made after
the date, after subsection 252(4) was enacted and after the
date on which it was said to apply. It is from that agreement
that the parties' rights and obligations derived.[3] Second, any
interpretation of a statutory provision that permits a deduction
of an amount by a payor and requires the inclusion of the same
amount by a payee (such as paragraphs 56(1)(b) and
60(b)) affects beneficially the rights of one to the
detriment of the other. I mention this simply as a note of
caution against considering, in interpreting such a provision,
only the manner in which rights are affected on one side of the
equation.
[24] It will
be obvious, from examining Mr. Driedger's book on The
Construction of Statutes[4] and his essays on the subject, that his thinking on
retroactivity and retrospectivity of statutes has been an
evolutionary process, resulting in modifications and refinements.
One needs only to read his book on The Construction of Statutes,
chapter 9, to see the problems that he identified in
struggling with the two concepts. By the time he wrote his essay
in the Canadian Bar Review in 1978 he was still struggling but
the struggles were more focussed and the weapons more sharply
honed.
[25] On pages
268-269 of his 1978 essay Mr. Driedger sets out the
conclusion he had reached in 1976 supplement to his text as
follows.
A retroactive statute is one that operates as of a time prior to
its enactment. A retrospective statute is one that operates for
the future only. It is prospective, but it imposes new results in
respect of a past event. A retroactive statute operates
backwards. A retrospective statute operates forwards,
but it looks backwards in that it attaches new consequences
for the future to an event that took place before the
statute was enacted. A retroactive statute changes the law from
what it was; a retrospective statute changes the law from what it
otherwise would be with respect to a prior event.
[26] The 1978
essay is an illuminating glimpse into the workings of one of the
outstanding legal minds of the 20th century. In his candid
admission that his analysis may have been wrong or in any event
incomplete the first time around, and that he was still not
certain that he was right, Mr. Driedger demonstrated a
refreshing degree of intellectual humility that marked his life
and work.
[27] At the
end of his essay, on page 276, Mr. Driedger summarizes
his conclusions:
1.
A retroactive statute is one that changes the law as of a time
prior to its enactment.
2.(1) A retrospective
statute is one that attaches new consequences to an event that
occurred prior to its enactment.
(2) A
statute is not retrospective by reason only that it adversely
affects an antecedently acquired right.
(3) A
statute is not retrospective unless the description of the prior
event is the fact-situation that brings about the operation of
the statute.
3.
The presumption does not apply unless the consequences attaching
to the prior event are prejudicial ones, namely, a new penalty,
disability or duty.
4.
The presumption does not apply if the new prejudicial
consequences are intended as protection for the public rather
than as punishment for a prior event.
[28]
Subsection 252(4) changes the consequences of a common-law
relationship that existed prior to its enactment, but only
insofar as that relationship was a necessary ingredient in a
claim to deduct a payment made under an agreement that came into
existence after its enactment. It may be retrospective on
Mr. Driedger's interpretation in subsection 2.(1)
of his above summary, but this is no justification for depriving
it of its effect according to its terms. It applies, as required
by S.C. 1994, c. 7, subsection 140(3), to
deductions claimed after 1992. The refusal to give effect to the
words "at any time" in subsection 252(4)
essentially writes them out of the Act or amends them to
read "at any time after 1992". Neither interpretation
can be warranted by any principle of statutory interpretation of
which I am aware. The interpretation that I believe is the better
one appears to conform more to the scheme of the Act and
the purpose of subsection 252(4).
[29] The
appeals are allowed with costs and the assessments are referred
back to the Minister of National Revenue for reconsideration and
reassessment to deduct in computing his income for 1995, 1996 and
1997 the monthly payments of $375 made by the appellant to
Charlotte Oslon for the support of their two children.
Signed at Toronto, Canada, this 21st day of September
2001.
"D.G.H. Bowman"
A.C.J.
COURT FILE
NO.:
2001-1539(IT)I
STYLE OF
CAUSE:
Between James Hunter and
Her Majesty The Queen
PLACE OF
HEARING:
Saskatoon, Saskatchewan
DATE OF
HEARING:
August 27, 2001
REASONS FOR JUDGMENT BY: The
Honourable D.G.H. Bowman
Associate Chief Judge
DATE OF
JUDGMENT:
September 21, 2001
APPEARANCES:
Counsel for the Appellant: Ray Wiebe, Esq.
Counsel for the
Respondent:
Tracey Harwood-Jones
COUNSEL OF RECORD:
For the
Appellant:
Name:
Ray Wiebe, Esq.
Firm:
McDougall Gauley
Saskatoon, Saskatchewan
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2001-1539(IT)I
BETWEEN:
JAMES HUNTER ,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeals heard on August 27, 2001, at
Saskatoon, Saskatchewan, by
The Honourable D.G.H. Bowman
Associate Chief Judge
Appearances
Counsel for the
Appellant: Ray
Wiebe, Esq.
Counsel for the Respondent: Tracey
Harwood-Jones
JUDGMENT
It is
ordered that the appeals from assessments made under the
Income Tax Act for the 1995, 1996 and 1997 taxation years
be allowed with costs and the assessments be referred back to the
Minister of National Revenue for reconsideration and reassessment
to permit the appellant to deduct in computing his income for
1995, 1996 and 1997 the monthly payments of $375 made by the
appellant to Charlotte Olson for the support of their two
children.
Signed at Toronto, Canada, this 21st day of September
2001.
A.C.J.
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